Comair to suspend operations on 29-Sep-2012

Comair announced (27-Jul-2012) it will cease all operations on 29-Sep-2012. Delta Air Lines SVP of Delta Connection Don Bornhorst said, “While regional flying has and will remain a key component of Delta's network, customer expectations and the unit costs of regional flying have evolved. In response, Delta recently announced its plans to reduce the total number of regional jets in its network while adding more mainline flying. This includes reducing the number of 50-seat regional jets from nearly 350 aircraft to 125 or fewer in the upcoming years. As a result of this reduction and changes to its customer-focused business strategy, Delta has made the difficult decision to cease Comair's operations." [more - original PR]

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At a top level the JV does seem to raise concern: combined, Qantas and American would hold 59% of the US-Australia market. Yet almost all of that – 53% – is from Qantas; American adds only 6ppt.

DOT rejects the notion that such larger market share can possibly be in the interest of consumers. Yet it appears to overlook the benefit American might bring in exchange for incremental market share gains. Nor is it clear if this combination is more anti-competitive than some JVs where two airlines, each with a small- or medium-sized position, combine and become multiples larger. Qantas' 53% market share was earned through quality and smart loyalty programme development while competitors lagged.

Qantas will continue growth in North America, its most successful international market, but American Airlines' growth is uncertain and it may re-evaluate a supposedly planned Los Angeles-Melbourne 787 service.

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Numerous airlines expressed concerns about Aeromexico and Delta’s concentration of slots at Mexico City Juarez, and the DoT responded by requiring slot divestitures at the airport along with the relinquishment of slots at New York JFK. The airlines have countered that the DoT’s analysis is flawed, and that a smaller number of slot divestitures at Juarez required by Mexico’s government should allay any concerns expressed by competitors. Aeromexico and Delta also argue another stipulation imposed by US regulators – limiting the joint venture to a five-year term – would create too much uncertainty for the viability of the business venture.

Delta’s plans to take its stake in Aeromexico up to 49% was contingent on the JV proposal succeeding. But with the stipulations imposed by DoT in order for the partners to establish their joint venture a dark cloud of uncertainty is hovering over Aeromexico’s future ownership structure.